Energy security measures could force prices up

17 October 2006
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18 October 2006 | Paul Snell

Buyers could face higher gas prices if government proposals on energy security go ahead.

The Department of Trade and Industry (DTI) outlines its proposals in a consultation on gas supply security, published this week.

One proposal will see gas suppliers required by law to store enough gas to be able to provide energy to their industrial customers during particularly harsh winters. The government concedes this could result in higher prices in the summer as suppliers hold back gas to put into storage for the winter.

Another suggestion is the establishment of a national body to better regulate the amount of gas stored by suppliers. This might compel suppliers to source additional supply instead of releasing it from storage. The government said this could also lead to higher prices, because stored gas is likely to be cheaper than imported gas.

A further measure involves private sector companies providing additional storage capacity and charging for the service.

While improving energy security may impact on prices, it could prove preferable to buyers being forced to purchase at any price or shortage of supply bringing production to a halt.

The consultation says: "There is a balance to be struck which requires judgments on various factors: potential hazards, related costs and probabilities, and the costs of the possible means of mitigating or avoiding them (eg. additional storage capacity)."

Send consultation responses to gasframework@dti.gsi.gov.uk by 12 January 2007.



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